Cowan v. Burchfield

• Decision Date: 01 August 1910
• Docket Number: 144.,12
• Citation: 180 F. 614
• Parties: COWAN v. BURCHFIELD. In re GWIN.
• Court: U.S. District Court — Northern District of Alabama

180 F. 614

COWAN v. BURCHFIELD.

In re GWIN.

Nos. 12, 144.

United States District Court, N.D. Alabama, Western Division.

August 1, 1910

[Copyrighted Material Omitted]

London & Fitts, for trustee.

Lee Cowart, for bankrupt.

GRUBB District Judge.

These two matters arising out of the same bankruptcy proceeding were submitted together for decision, and are so related to each other as to make one opinion cover both.

The bankrupt had conducted a small mercantile business at Kellerman, Ala., for seven years before the filing of the petition, and, with his family, had lived on the premises where one of his stores was located. His patrons were principally coal miners; Kellerman being the location of a coal mine. Prior to July 1st there had been a strike at this coal mine, and its existence had embarrassed the bankrupt by diminishing his trade and delaying his collections. The evidence taken before the referee upon the bankruptcy hearings, which, by agreement, is to be used in the plenary suit, together with the independent evidence, is convincing that the bankrupt, foreseeing financial embarrassment about July 1st, from then until the filing of the petition against him, was preparing himself for it by transferring his real estate to others, and reducing his merchandise to cash by selling it and collecting for it to as great an extent as possible.

On July 1st he executed four deeds to substantially all his real estate. One was executed to his brother to secure an alleged debt, not otherwise evidenced in writing; two were executed to his clerk and kinsman partly to pay an alleged debt and partly for an alleged present consideration of $440; and one for an alleged present consideration, to the brother of his clerk, who was also his kinsman. The two latter were young men of little business experience and of no means except whatever consideration, if any, was paid by them. The bankrupt by these conveyances divested himself of even the property on which was located his dwelling and stores. Pressing need of money by the bankrupt is claimed to have been the reason for the transfers; but this would not account for the conveyance to his brother, from whom he got no cash. None of the deeds were placed on record by the grantees until about the time of the filing of the petition against him early in December. The uncertainty shown by the evidence of two of the grantees as to the amount of the consideration paid by them for the conveyances is inconsistent with the existence of a serious transaction between the bankrupt and themselves. The considerations were also inadequate. The trustee filed a plenary bill in the District Court to set aside the four conveyances as made with intent to defraud creditors and for simulated or inadequate considerations making the grantees parties.

The validity of the four conveyances as against the trustee is the question presented by the plenary suit.

The petition for review relates to the bankrupt's exemptions.

From July 1st the only attention given by the bankrupt to his business was that of traveling around the country making collections, and, though his oral testimony is to the effect that his efforts were unsuccessful his books show that a considerable amount was collected. The referee, taking August 1, 1909, as a basing point, calculated that the bankrupt failed to account to the trustee for from $800 to $1,600 of assets that he should have been in possession of when the petition was filed against him. This estimate was arrived at by taking into consideration the amount of his stock and accounts on August 1st, as compared with the inventory of the receiver. The referee also found that the bankrupt, after November 12, 1909, actually collected $516.62, and paid out subsequently but $127.06, leaving a balance collected and not disbursed of $389.58. The petition was filed December 2d. No money was turned over to the trustee by the bankrupt. The trustee set aside to the bankrupt as exempt specific property of the value of $225, which left a balance of $775 due him on his personal property exemption, which the trustee satisfied by allowing it to him from assets found by the referee to have been in his possession at the time the petition was filed and not surrendered to the trustee. The trustee also disallowed his claim of exemption to a piece of land purchased by him on November 12th, upon the ground that he was not occupying it at the time of the filing of the petition as required by the Alabama exemption statute. The land was purchased about three weeks before the filing of the petition, and the bankrupt did not move upon it until after the receiver in the bankruptcy proceedings had taken possession of his store in part of which he lived. The evidence showed that he bought the land with the intention at some time in the future of making it his home, and that before the petition was filed he had caused some hardware to be delivered on the land for the purpose of making repairs on it. No other evidence of occupancy or intention to occupy is shown in the record. The referee confirmed the report of the trustee setting aside the bankrupt's exemptions, and the bankrupt seeks to review this order by his petition.

The conclusion of the court, from the facts in the record of the plenary suit, is that the bankrupt made all four conveyances simultaneously as part of a scheme to put his real estate beyond the reach of his creditors in view of his imminent and inevitable bankruptcy, and that the grantees knew or should have known of such intent, and that they kept the conveyances from record with the intent to assist in its accomplishment and that all the conveyances should be set aside except that conveying the land on which the bankrupt lived with his family at the time of the conveyance. The evidence shows that this lot was used by the bankrupt at least as much for homestead as for business purposes, and not incidentally only as a homestead, and should be considered as the homestead of the bankrupt. Marx v. Threet, 131 Ala. 344, 30 So. 831. If considered the homestead of the bankrupt, the conveyance of it could not operate as a fraud on...